Roku Tops Q2 Earnings Expectations, but Total Streaming Hours Decline by 1 Billion from Prior Quarter

Earlier this year, for example, Roku paid substantially less than $100 million for the assets of Quibi, which had landed $1.75 billion in funding, and bowed a batch of 30 Quibi shows (rebranded as Roku Originals) in May. It plans to roll out another 45 shows from Quibi's library later this year. The Quibi shows collectively earned eight 2021 Emmy Awards nominations in short-form categories.
Roku easily beat Wall Street forecasts for second-quarter 2021 earnings — posting record 81% revenue growth — but the net number of new active user accounts fell shy of analyst expectations. What's more, the total number of hours streamed fell by 1 billion hours from the prior quarter.
Roku said it "anticipate[s] quarterly sequential increases in operating expenses in the second half of 2021 from our investments in headcount, product development, and sales & marketing." As a result, it expects profits to take a hit in Q3: Roku forecast adjusted EBITDA of $60 million-$70 million, compared with $56.2 million in Q3 2019 and $122.4 million in Q2 2021. For Q3, Roku estimated net revenue of $675 million-$685 million, which at the midpoint would represent 51% year-over-year growth.
Average revenue per user for the quarter (on a trailing 12-month basis) climbed 46% year-over-year to $36.46. For Q2, Roku's Platform segment — which includes advertising and a share of subscription revenue from partners — revenue topped $532 million, up 117% year-over-year.
On the Roku Channel front, Roku has been opportunistically snapping up exclusive and original content that it can monetize with ads.
Roku shares fell more than 9% in after-hours trading.
Q2 net adds "were higher than pre-COVID levels in Q2 2019, but as expected, lower than the pandemic-related surge of Q2 2020," Roku said in its letter to shareholders.
Citing Nielsen measurements, Roku claimed it still "significantly outperformed" the TV industry in the most recent quarter, with Roku’s streaming hours increasing nearly 19% globally in Q2 year over year compared with a nearly 19% decline in traditional TV consumption.
The company blamed the sequential decline in streaming hours on consumers seeking "increased out-of-home entertainment activities (such as dining and travel) in Q2 as a result of pent-up demand and the loosening of COVID-19 restrictions."
Total net revenue grew 81% year-over-year to $645 million, and Roku reported net income of $73.5 million, or 52 cents per diluted share. On average, Wall Street analysts expected Roku to post Q2 revenue of $618.5 million and EPS of 12 cents.
Analysts at Morgan Stanley expected Roku to end the quarter with 56.2 million accounts. In Q2, Roku's active accounts reached 55.1 million, an increase of 1.5 million active accounts from Q1. Meanwhile, streaming hours on the Roku platform for Q2 were 17.4 billion hours, a decrease of 1 billion hours from Q1 2021 (or about 5% sequentially).
According to Roku, more active accounts streamed a Roku Original in the first two weeks on the Roku Channel than the number of Quibi accounts did on Quibi over the brief nine months of the app’s lifetime. With the initial Quibi shows, the Roku Channel saw “record-breaking reach” from May 20-June 3, according to the company, with more unique accounts streaming the Roku Channel than any other two-week period. But it didn't release actual viewership numbers.” />
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